Final answer:
To determine the net worth using a T-account balance sheet for a bank with deposits of $400, reserves of $50, government bonds worth $70, and loans made $500, you subtract the bank's total liabilities from its assets, resulting in a net worth of $220.
Step-by-step explanation:
Understanding a Bank's T-account Balance Sheet
When examining a bank's balance sheet through a T-account, assets and liabilities must be accounted for to determine the bank's net worth. Let's set up a T-account for a hypothetical bank with the following information:
- Deposits: $400
- Reserves: $50
- Government bonds: $70
- Loans made: $500
The T-account balance sheet would display the following:
Assets
- Reserves: $50
- Government Bonds: $70
- Loans: $500
Liabilities
To calculate the bank's net worth, subtract the total liabilities from the total assets:
Total Assets (Reserves + Government Bonds + Loans) = $50 + $70 + $500 = $620
Total Liabilities (Deposits) = $400
Net Worth (Total Assets - Total Liabilities) = $620 - $400 = $220
The net worth of the bank in this example is $220.